Germany Rejects Euro-Area Pooled Debt on Eve of EU Summit
Germany’s aim is to keep debt-pooling off the list of topics for further discussion at the end of a two-day EU summit starting in Brussels tomorrow, a German government official said in an interview today, speaking on condition of anonymity because the leaders’ talks are private.
The heads of state and government will consider a report by EU President Herman van Rompuy that lays out options for closer economic and fiscal union in the 27-nation bloc. The “pooling of some short term sovereign funding instruments (e.g. treasury bills) on a limited and conditional basis could be examined further” as a way to break the link between banks and public finances, the report says.
Chancellor Angela Merkel told German lawmakers yesterday she rejects parts of the report that deal with shared liability, according to two participants who spoke on condition of anonymity because the meeting was closed.
Wrangling over enlisting Germany’s economic might to help lower borrowing costs for other euro-area countries reflects divisions between the region’s northern and southern tier over how to quash the three-year-old debt crisis. There’s “no other option” than “arduous” economic overhauls in the euro area’s less-competitive nations, Merkel said on Oct. 13.
Germany also says it won’t be rushed into EU-wide banking oversight. No agreement on the so-called banking union is expected at the EU summit as finance ministers need to do more work on the topic, two German government officials said in Berlin today, speaking to reporters on condition of anonymity because the pre-summit deliberations are private.
“Quality comes before speed, which doesn’t mean that we don’t want to work quickly, but we need to arrive at the end at better banking oversight then we have today,” Merkel said before talks with Swedish Prime Minister Fredrik Reinfeldt in Berlin yesterday.
Spain will have to accept terms for any European financial aid and those conditions will have to be negotiated, the officials said. It’s impossible to say what the conditions might be, they said.
Spanish Prime Minister Mariano Rajoy’s government has said it won’t request bailout funds, a condition for triggering European Central Bank help to lower borrowing costs, until the terms are clearer.
“We’d have to look at any application that Spain made, whether for a precautionary credit or a full program,” Michael Meister, a deputy caucus leader of Merkel’s Christian Democratic bloc, said in a phone interview yesterday. “Whatever is requested, it won’t be without conditions.”
Greece will be discussed on the summit sidelines, with talks between the Greek government and the so-called troika of international inspectors far advanced, the German officials said. An acceptable troika report, a requirement for the next aid installment, is in sight, they said. Even so, the summit won’t make decisions on Greece, they said.
Stronger oversight of euro-area budgets is required, and the EU needs more powers over member state budgets, the officials said. More EU integration will probably mean treaty changes, they said.
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